As we look back on a challenging year in which inflation receded, major economies proved surprisingly resilient, but geopolitical risk remained high, we explore the results of our annual client survey on the prospects over the coming year for global growth, inflation and sustainability-related issues.
In December, we conducted our annual macroeconomic survey in which we asked our clients about their expectations for 2024 and beyond. 186 clients took part in the survey, of which 31% were located in Europe, 28% in Asia (including India, China and Australia), 25% in North America, 10% in Central and South America and 5% in Africa. The largest proportion of clients came from the metals sector (46%), followed by mining (10%) and end-use (6%).
In December, we conducted our annual macroeconomic survey in which we asked our clients about their expectations for 2024 and beyond. 186 clients took part in the survey, of which 31% were located in Europe, 28% in Asia (including India, China and Australia), 25% in North America, 10% in Central and South America and 5% in Africa. The largest proportion of clients came from the metals sector (46%), followed by mining (10%) and end-use (6%).
Clients more optimistic about growth than last year
In our survey for 2023, the majority of clients (40%) expected annual growth of between 0% and 1%, while we predicted annual growth of 1.6%. Given a resilient US, the reopening of China, and Europe which has at least avoided a deep recession, we expect 2023 growth to amount to 2.5%. Compared to last year's survey, clients are more optimistic about growth. The largest share of clients (41%) expect growth of between 2% and 3% in 2024, while a significant minority (33%) anticipate growth of between 1% and 2% (see Figure 2). Compared to our own forecast, according to which global growth will slow to 2% by 2024, this looks slightly more optimistic. There is a degree of heterogeneity in the responses, with clients in Europe and Africa (EMEA) being somewhat more bearish than those in Asia and America.
Clients expect inflation to take time to fall, and interest rates to remain high
2023 was a year of falling inflation in both the US and the eurozone, thanks to easing supply pressures, lower energy prices and – in the eurozone – a slowdown in economic activity. While we expect inflation to fall further in 2024, albeit at a slower pace, our clients are more cautious. The majority of clients do not expect inflation in the US or the eurozone to fall to 2% before 2025, with 25% (eurozone) and 21% (US) expecting inflation to remain above target even until 2026 (see Figure 1, left-hand side).
This hawkish view on inflation is reflected in clients’ expectations of monetary policy. While CRU expects the first rate cuts in 2024 H1, with the ECB leading the way in April followed by the Fed in May, most CRU clients expect rate cuts to begin only in 2024 H2, with a significant minority (20–30%) expecting even later (Figure 1, right-hand side). In line with their expectation that inflation in the US will fall faster than in the eurozone, more clients expect an early rate cut by the Fed than by the ECB, in contrast to our view.
Despite the current geopolitical uncertainty in the Middle East, most clients expect oil prices to remain stable in 2024, with the majority expecting them to be between $70–$90 per barrel. This is consistent with our forecast of an average oil price of $84 per barrel. The share of electric vehicles is expected to continue its upward trend but after global sales increased by 39% in 2023, clients expect lower growth this year.
The biggest share of clients (36%) expects global EV sales to increase by 10–20%, followed by 31% that expect 0–10% and 27% that see 20–30% growth. Looking at regional differences, Asian customers are the most optimistic about global growth in EV sales. In the USA, on the other hand, 8% of respondents believe that global EV sales will decline this year. CRU’s own forecast of 32% EV sales growth is more bullish compared to clients that might be cautious about EV subsidies in countries like the US and Germany being scaled back this year.
We asked clients what they viewed as the three main risks to global growth over the next three years. The results are shown in Figure 3. Prolonged higher interest rates and war (both 47%), followed by deglobalisation (35%) and high or volatile energy prices (33%) were the top responses. Compared to last year, when persistent inflation was the most frequently mentioned risk, inflation has now become less important. Most clients did not select mass migration, supply chain problems or government debt levels as a top three risk for the next three years.
Energy transition is the biggest sustainability-related issue
In the questions on sustainability, we asked clients to name the three most important sustainability-related issues for their company over the next three years. The biggest issue cited by clients was the energy transition (51%), followed by supply chain and cost pressures (44%) and trade (e.g. CBAM, IRA, EV tariffs), as well as emissions trends and climate targets (both 38%).
When asked whether clients expect environmental policy in their region to become stricter or more relaxed over the next three years, most clients expect a stricter policy (70%), while only a small proportion (6%) expect a more relaxed policy, while 24% expect no change. However, in view of the upcoming presidential elections in the USA, almost half of respondents in the Americas expect environmental policies to remain unchanged or even be relaxed; while the share of respondents expecting stricter policy was the highest in Asia. In 2023, the average European carbon price was €82/tCO, and most clients expect carbon prices to remain at a similar level, with 55% expecting a price between €80 and €90/tCO. A significant minority of 29% expect lower prices.
Finally, we asked clients whether they were more concerned about physical climate risks such as flooding and water scarcity or green transition risks such as regulations and carbon pricing for their business. 48% of clients stated that they were more concerned about the transition risks, against only 16% citing physical climate risks (33% said both were equally important). While the majority of respondents in all regions were more concerned about transition risks, physical climate risks appear to be relatively more important in the Americas and Asia (see Figure 4).
In summary, the survey paints a more positive picture of the metals and mining sector than last year. While our clients expect growth to remain resilient and expect interest rate cuts this year, they are more cautious about inflation expectations and the timing of cuts. CRU clients are also aware of the downside risks arising from geopolitics and prolonged restrictive monetary policy. All the while, our clients are clearly and understandably focused on the impact the energy transition might have on their business.
In 2024, we will continue to monitor the global economy, focusing on what is relevant to you as our clients and keeping you informed throughout the year.
